What is the primary function of the secondary mortgage market?
Correct Answer
B) Buying existing mortgages from primary lenders
The secondary mortgage market — dominated by government-sponsored enterprises such as Fannie Mae (FNMA) and Freddie Mac (FHLMC) — purchases existing mortgage loans from primary lenders such as banks and mortgage companies. By buying these loans, the secondary market replenishes the primary lenders' capital, enabling them to originate new loans. This process keeps mortgage funds flowing and helps stabilize interest rates nationwide.
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